Thursday, October 27, 2011

I tend to not underestimate anyone who apprenticed under Larry Ellison

Hype about the cloud, pushed by CEO Marc Benioff, whom Tilson called a “world-class salesman,” is giving way to the fact that Salesforce has what he calls “a nice app to help mid-market companies manage their sales force.” Its other lines of business — including Chatter, its social application, and its plans for pushing into larger-sized enterprise companies — just don’t justify its huge market cap, which was until today north of $17.5 billion. Today, Salesforce’s market cap was about $800 million smaller as the shares fell by $6, or 4.6 percent, to $123.56.

Tilson is betting that Salesforce’s fair value is about 75 percent lower than its current trading range, which, based on Tuesday’s closing price of $129.56, would put it at about $33 a share.